What are ERC-20 Tokens?

What are ERC-20 Tokens?

By Mark Anstead | Tech stuff | 24 Sep 2021


 

ERC-20 tokens are cryptocurrencies that follow the token standard set out by Ethereum,  enabling them to transact and interact with the Ethereum main chain and its smart contracts. Put more simply, any ERC-20 token will be usable within decentralized applications and protocols running on the Ethereum chain, whereas tokens with different standards will not be compatible unless bridged. 

 

Why are ERC-20 Tokens So Popular?

 

In the time before ERC-20, for cryptocurrencies to provide interoperability with one another, the developers would have to be intimate with one another’s codebase and build parameters that ensure that their tokens interact successfully. This naturally stunted the general development of cryptocurrency as it siloed different development projects unto themselves. Adhering to the ERC-20 blueprint meant that new tokens had a firm foundation from which to interact, resulting in a thriving ecosystem that was a key driver of 2017’s bullrun.

This is also because the ERC-20 standard makes it easier for developers to create tokens, as a lot of the grunt work to ensure compatibility with the crypto space has been done for them. As long as they follow the blueprint, their token will function successfully. This led to the ICO boom in 2018, as the ability to launch your own ERC-20 token became pitifully easy compared to previously. These days, roughly 90% of all crypto tokens are ERC-20, and more than 200,000 tokens are built to these standards, figures which speak to the success of the paradigm it created. Other blockchains, like Solana and BSC, have issued similar templates so that crypto-developers can easily construct tokens on their networks.

 

What does ERC-20 stand for, and Where does the Number Come From?

 

In the Ethereum ecosystem, people are able to create improvements to the programming tools, or protocols, which are called “ERC’s”. This stands for an “Ethereum Request for Comment”. The second number, in this case “20”, represents the amount of proposals made to date in order.

 

What Tokens Are ERC-20?

 

Some of the biggest and most successful digital assets embrace the form of ERC-20 tokens. This includes Chainlink’s LINK, AAVESTORJ and many, many more. Most of the DeFi space as it exists today is currently based on protocols run by ERC-20 tokens. Furthermore, even non-compatible assets like Bitcoin can be “wrapped.” This turns them into ERC-20 tokens which can then be deployed within the Ethereum ecosystem like any other, and be used in DeFi yield farms where they otherwise would not be compatible.

Finally, most stablecoins have the bulk of their token issuance on the ERC-20 standard. Tether, for example, has $31 billion of its coins in circulation using ERC-20. Naturally, other blockchains have sought to imitate the success of this blueprint, but ERC-20 remains dominant in the space, propelled by its first mover advantage.

 

ERC-20 and the Future

 

ERC-20 is fast becoming the gold-standard for new cryptocurrencies. Ethereum’s massive ecosystem of projects means new developers creating new applications want to be using the ERC-20 standard. Although rival blockchains can, and will, compete, for now, and probably for all the future, ERC-20 will be the dominant crypto template.

With ERC-20 so prevalent, and with it likely to retain its share as the core standard that tokens are built on – especially as so many market-leading DEXs and applications are built on it – then the importance of a good ERC-20 wallet is paramount to interact with the ever-escalating crypto markets.

 

What is Numio?

 

Numio is an ERC-20 wallet that allows you to hold, transact, pay with, and deploy your ERC-20 tokens with the same fluidity as you would a traditional payment currency. This is due to its pioneering use of zkRollups (an Ethereum layer-2 technology), which talks to the Ethereum main network and allows you to instantly transfer at a negligible gas fee.

 

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Mark Anstead
Mark Anstead Verified Member

Co-Founder of Numio


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